What You Pay

Here we will look at the types of expenses you have to pay if you get employer-sponsored coverage. Then, we’ll look at what factors can make those expenses higher or lower.

Expenses

For employer-sponsored plans:

• The employer will offer to pay all or part of the monthly premium for the employee, the employee’s children, and the employee’s spouse.
• The employee may also need to pay part of the monthly premium.
• Everybody covered by the plan will have to pay additional fees when they get certain medical services.

The Monthly Premium

The monthly premium is a set amount of money that has to be paid each month for you to be covered by the plan, regardless of whether you use any health care that month. Generally, the employer will pay a part of the premium and the employee will pay a part.

Employer plans usually offer a coverage option for the employee that costs the employee, for the employee’s premium alone, less than 9.02% of the employee’s family income. That’s the definition of affordable coverage in federal law. The plan should also meet a certain benefits level:

• If the employer is small (50 or fewer employees), the plan must be classified under one of the four coverage levels under the Affordable Care Act (ACA).
• If the employer is large (more than 50 employees), the plan should meet a "minimum value" standard, which means the plan should cover at least 60% of the health costs of the average population. This standard is about equivalent to a bronze-level plan.

The employer may offer to help pay the premium for other family members covered by the plan or may require the employee to pay the entire premium for other family members. There is no legal limit to how much the employee may have to pay for coverage for family members. If the premium for family members is very high, they may be better off getting coverage through HealthCare.gov. Learn more about affordability rules for family members and how it affects eligibility for tax credits on HealthCare.gov.

Note: Before 2023, the spouse or children of an employee would not qualify for subsidies on HealthCare.gov if the employer offered coverage that was affordable for the employee's policy alone, even if the cost to add the rest of the family wasn't affordable. This was called the "family glitch."

Additional Fees When You Get Care

Each time you get care, you may need to pay additional fees. Which of these fees you have to pay and how much you have to pay depend on your plan; some plans only have copayments, while others have copayments, co-insurance, and deductibles.

Copayments are a set amount you have to pay for a medical visit or service. The exact amount of the copayment varies depending on the service you get: medications, visits to specialists, lab tests, X-rays, emergency room visits, and other services can all have different copayment amounts.

Co-insurance is a set percentage of the cost of a visit or service that you must pay.

A deductible is a set amount of money that you pay out of your own pocket each year before the insurance company will begin to pay for certain services, including hospital care, emergency room visits, and brand-name prescription drugs. Once you have paid the deductible, you do not have to pay it again until the next calendar year.

Family plans often have both an individual deductible for each member and a deductible for the entire family. The individual deductible is the amount one person needs to meet before insurance kicks in for them, if their family deductible hasn't yet been met. Once the family reaches the family deductible, insurance kicks in for everyone, even if certain members haven't hit their individual deductibles yet.

Tip: If you have to pay a deductible before your health plan will pay for your prescriptions, ask your health care provider to prescribe generic medications, which are often much cheaper. Then, compare prices at different pharmacies to get the best price.

Maximum Out-of-Pocket Expenses

Each plan has a maximum amount you have to pay each year in fees for medical services (copayments, co-insurance, and deductible). This cap for your out-of-pocket expenses does not include the money you spend on your monthly premiums. The exact amount of your out-of-pocket maximum will depend on your plan.

What Affects How Much You Pay

The amount you pay for these expenses if you get an employer-sponsored plan depends on five main factors:

• How much of the premium the employer offers to pay
• The plans offered by the employer and the one you choose
• The age of the people covered by the plan
• Whether you use tobacco, and
• Wellness plans offered by the employer.

How Much Your Employer Offers to Pay

We already discussed how much the employer may offer to pay each month for the premium for an employee and the employee’s family members. Usually, the employer will offer to pay most or all of the employee’s premium, while paying part of the premium for family members.

The Plans Offered by the Employer

The employer gets to decide which health plans employees and their families can sign up for. Some employers only offer one option, while other employers offer many options.

Most employers pay a certain amount of the premium of its employees and their families. If an employer offers more than one option and an employee chooses a plan with a higher monthly premium, the employee is responsible for paying the additional amount each month.

The Plan You Choose

If the employer offers more than one plan, you will need to consider the costs and services of each plan.

There are two main factors, in addition to the premium, that will impact what an employer-sponsored plan will cost:

1. The cost of other fees. If you choose a plan with a higher premium, its copayments, co-insurance, deductible, and out-of-pocket maximum will be lower when you need medical services.
2. The type of plan you get. There are three main possibilities, with HMOs and EPOs typically less expensive than PPOs:
   • Health Maintenance Organizations (HMOs):
     • Have a specific network of health care providers, including doctors, hospitals, labs, and pharmacies and you can’t get treatment from others except in an emergency.
     • You have a primary care provider (PCP) and may need to see your PCP for a referral before getting specialist treatment.
   • Preferred Provider Organizations (PPOs):
     • Have a network of doctors and you can see any of them, including specialists, without a referral.
     • You can get health care outside the network, but it is more expensive.
   • Exclusive Provider Organizations (EPOs):
     • Have a specific network of health care providers, including doctors, hospitals, labs, and pharmacies, and you can’t get treatment from others except in an emergency.
     • You do not need a referral from a PCP to see specialists.

The Ages of Plan Members

Plan premiums may be higher for older workers and for older family members that are added to the plan. If the employer is small (50 or fewer employees), the plan is covered by the ACA and has to follow rules that limit the cost of a premium based on age:

• Older people can only be charged a premium that is at most three times what a 21-year-old would be charged.
• A plan premium can only charge a family for a maximum of three children under age 21. Any additional children under 21 can be included in the plan without the premium cost going up.

Whether You Use Tobacco

If you use tobacco, your premium may be higher than what non-tobacco users pay. For plans from small employers (50 or fewer employees), your premium can be up to 20% higher than a non-tobacco user's premium. For plans from large employers, (more than 50 employees), your premium can be up to 50% higher. However, your insurance must give you the chance to lower your premium to the non-tobacco rate by doing a smoking cessation program or a similar program.

Wellness Programs Offered by the Employer

The employer might also have wellness programs or health incentives that can affect your monthly premium. For example, the employer may ask you for some information about your health, and if you meet certain health standards, you may have a lower (discounted) premium. If you do not meet those standards, you may either have to pay a higher (non-discounted) premium or participate in a program to avoid paying the higher premium. If the employer's insurer tries to charge you a higher premium for a reason related to your health information, like your weight or blood pressure, you should have the opportunity to participate in an alternative program or activity instead of paying the higher premium.

Wellness programs are voluntary—the employer may give employees and their family members rewards (like a discounted premium) for sharing their health information or participating in health activities, but they cannot force you to do so.

Tax-Free Ways to Save Up Money for Medical Expenses

There are a couple of ways you can save up money for your medical expenses. The big advantage of these is that they let you save the money tax-free. The higher the rate of taxes you pay on your earnings, the more these savings plans will help you. If you don’t pay a high income tax rate, they probably aren’t going to help you much.

Health Savings Accounts (HSAs)

Some health plans let you create Health Savings Accounts (HSAs) to set money aside to help you pay for certain approved medical expenses. For example, you could use the money in this account to pay for expenses, like doctor’s visits or prescriptions, that aren’t paid for by your insurance before you meet your deductible.

You decide how much money to put into the account, up to a certain limit, and you don’t have to pay taxes on the money you put into the account. You can get a health plan with an HSA if your employer or your spouse's or parent's employer offers plans with them. HSA-eligible plans are also called High-Deductible Health Plans (HDHPs).

Learn more about HSAs.

Flexible Spending Arrangements (FSAs)

A Flexible Spending Arrangement (FSA) is a type of account that can only be set up as a benefit through an employer. The employee can contribute money to the FSA through automatic payroll deductions and doesn't have to pay any taxes on the money they put into this account. The employer can choose to make contributions to the account too. There are annual limits on the amount of money an employee can put into an FSA.

The money from this account is used to reimburse you for qualified medical expenses that you have to pay for that aren’t covered by your insurance. An employee can decide how much money they want to put into the account, but usually they have to use all of the money in the account by the end of the year, or they lose it.

If you choose to do an FSA, make sure you calculate the amount of money you will actually use, keep track of your expenses, and pay for them using the FSA.

For more information and to find out whether your employer or your spouse's or parent's employer offers an FSA, talk to the employer’s human resources department.